A few days ago world renowned economist Jim Rickards was featured on the USA Watchdog podcast. He covered his beliefs on who is going to win the election, how to trade the markets based on who wins, and inflation.
Before we get too far into the inflation topic, we just want to touch on his views on how to trade the market depending on who wins. This is of course a trading blog..... Mr. Rickards' view is that the market has already priced in a Hillary Clinton win. This can been seen with the Vegas odds and current market movement. As a result should Hillary Clinton win, you should not expect much market movement, maybe a slight move to the upside. However, should Donald Trump win, that is when things could get interesting. Similar to when the surprise Brexit moved happened. It was a complete shock to the markets that Brexit occurred and thus there was a lot of volatility. If you listen to the major news sources, Vegas, and current market conditions, then it would be a complete shock for The Donald to win. Mr. Rickards believes that should this happen, then the market will have a sharp move to the downside. For traders a Donald Trump victory would be great news, as with volatility comes opportunity.
Now, onto the inflation subject.
Since the Financial collapse in 2008 central banks around the world have been trying to get inflation to occur, and to stabilize economies. They have been doing this through Quantitative Easing, essentially they are printing money. None of the central banks have been able to meet their inflation targets, and as a result they just keep printing money and pumping it into the system. Mr. Rickards compares what is happening to an earthquake. Because the Central Banks stepped in and bailed out the economy in 2008 they did not allow the Earthquake to take it's full course. Instead they stopped it during the middle, and now the pressure continues to build and build. Each year they continue to print more money resulting in continuous pressure being applied. Eventually, like tectonic plates, the markets will snap resulting in a massive earthquake.
When the next financial earthquake occurs Central Banks, which Mr. Rickards is suggesting should be around 2018, the Central Banks will do what they have always done, print money. Only this time they will also list the services of the IMF (International Monetary Fund). The IMF will employ the use of SDRs, which are special drawing rights given to governments. Similar to Central Banks, the IMF just prints these SDRs out of thin air. As we have mentioned a few times here at DrinkForex, you cannot print money out of thin air forever. Eventually all of this money printing is going to catch up and the fiat currencies are going to experience hyperinflation. When this happens Mr. Rickards goes on to say that banks, brokerage accounts, etc. will go on lock down mode to prevent a "run on the banks".
Mr. Rickards goes on in the interview to explain what the crisis will look like, and how to protect yourself from it. The obvious choice of course is to start buying gold, which has stood the test of time; which no fiat currency can say the same.
Below we have included the full interview. It is a great watch if you have 30 minutes.